The Mundus Brief: May

May began with the Drottninggatan terror attack just 3 weeks old. Despite the awful tragedy, in which 5 lost their lives and 15 more were badly injured, the event slipped quickly out of both the news and Swedish conversation. If the intent of terrorism is to affects the way that survivors live their lives, then Rakhmat Akilov failed miserably. The scars on the Åhléns store were turned into a shrine, and Swedes decided that they’d seen enough. The matter was turned over to the criminal court and the police chief hailed the response as proof that his re-organisation of the police force was a success.

The debate around Swedish membership of NATO and defence against an aggressive Russia rumbled, without ever causing thunder. The US Secretary of Defence James Mattis told media during a visit to the Pentagon by Minister by Swedish Defence, Peter Hultqvist, that if Sweden were attacked by Russia, the US would provide help, despite the Nordic country not being a member of NATO. Hultqvist responded by agreeing that the two countries were aligned on the importance of increasing Swedish military capabilities and that Sweden should take responsibility in responding the security situation in its region.

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The French election result was widely treated as cause for celebration in Sweden, except, one expects by the Sweden Democrats. Not only was Marine Le Pen vanquished easily by Emmanuel Macron, but Swedes heard a lot that they found that they liked from the new French President. His rhetoric for centrist economic policies combined with solid social policies sounded very similar to the Swedish model, much-beloved by Swedes. In addition, his initial calls for a stronger EU were generally viewed positively, except for the implication that Sweden would be forced to abandon the Krona for the Euro.

The Swedish model made the news in an unfortunate way, with Dagens Industri describing Stefan Löfven’s prestige project “Global Deal” as a fiasco. The Löfven government has attempted to export the Swedish model, but since the launch in New York eight months ago the number of connected companies has decreased and the responsibility for the initiative has now been downgraded from the Prime Minister’s office to the Foreign Ministry. Several companies and unions who supported the project at the start have not heard much about Global Deal since then. However, a representative for the Foreign Ministry says that they are now experiencing a keen interest from South America. For those of you uncertain what is meant by the term, see our feature story “The Nordic Way”, on how personal autonomy and a strong social safety net are adapting to meet modern challenges.

Business is continuing to thrive, as documented in a slew of surveys and forecasts during May. In NIER’s April edition of the Economic Tendency Survey, the indicator climbed from 108.8 in March to 112.8 in April, which indicates a much stronger economic growth than normal. The Riksbank also reported that economic activity in Sweden is booming; resource utilisation is assessed as higher than normal and economic activity is expected to continue to strengthen in the coming years. Confidence indicators point to optimism among households and companies both abroad and in Sweden. SEM also agrees, with its Nordic Outlook report forecasting GDP growth of 3.1% this year, and 2.6% in 2018, a “slight upward revision of our earlier already optimistic forecast.” SEB thinks that the government will take advantage of the very favourable fiscal situation to unveil an “election budget”.

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The start-up scene is also doing very well, although its current performance is best described as strong and stable, rather than the dizzying growth it had during 2016. In May we reported a number of stories and data from The Nordic Web highlighting local successes, which this was tempered somewhat by Startup Genome, which ranked Stockholm only 4th in Europe and 14th globally. Still, that isn’t bad – Stockholm is ranked above Sydney and Shanghai, and was recently able to attract Amazon to establish 3 data centres. Spotify, a jewel in the crown was much in the news, with a number of stories exploring its decision-or not, to IPO. Kobalt, another digital music company raised $75 million, according to DI Digital, valuing the company close to so-called unicorn status.

The biggest negative business story was the reports that Nordea has decided to leave Sweden, in response to the government’s plans to introduce a financial tax on banks. Nordea is being courted by Copenhagen and Helsinki. If that happens Stockholm will probably wipe away the tears and move on. Stockholm is a leading European fintech hub, attracting around a fifth of all investments in Europe. The fintech scene is becoming increasingly more established, with the newly founded Stockholm Fintech Hub announcing partnerships with both Nordea and Handelsbanken.

The biggest issue for Sweden remains immigration and integration, featuring in the news almost every day. During May the government abandoned ID checks at the border with Denmark, despite ministers saying that they actually wanted to increase surveillance and checks of immigrants. Sweden continues to struggle with its liberal instincts being stretched by the realities of massive numbers of refugees seeking angles to stay. A total of 257 migrants have escaped from detention centres since 2010, and recently it was reported that 76% of unaccompanied refugee ‘minors’ turned out to be older than 18, when tested medically.

The twin refugee issues continue to have a seismic effect on Swedish politics, which is experiencing a series of earthquakes in response. Weekly opinion polls continue to document the slide in Moderate support and the boom in support for the Sweden Democrats, now Sweden’s second most favoured political party. The June edition of the Monthly Policy Review featured a portrait of the party’s leader, Jimmie Åkesson. A decade ago, he was a newly elected party leader of a fringe party with neo-Nazi roots. Today, he has his sights on bringing his party into a governing position in the 2018 election. Meanwhile, it is widely tipped that Anna Kinberg Batra (M) will strugge to keep her job, and the Liberals now have a formal leadership challenge after Birgitta Ohlsson decided to run for party leader.

Last, but certainly not least, we turn to climate change. President Trump left it to June 1 to abandon the Paris Agreement, but it seems clear that the cat was out of the bag, well before the announcement. On May 30, PM Löfven expressed his view that “Everyone who signed the climate deal must live up to it. If it is questioned by the American administration this is very unfortunate”. Earlier in the month the Nordic environment ministers adopted The Oslo Declaration, stressing that climate change is one of the greatest challenges facing mankind, requiring evidence-based climate legislation. The political decisions are now clearly flowing through to businesses – during May, Volvo cars announced both an objective of putting a million electric cars onto the world’s roads by 2025, and that it will discontinue development for its diesel engines. Arla, a milk cooperative announced that it would be fossil free in 10 years, by making its own diesel-fuel replacement. That is just one small step along the way if Sweden is to become the first ‘fossil free welfare state’, as promised by the Löfven government. During spring, the government has made a flurry of announcements outlining how it intends to make this happen. Read our analysis here.

 

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Sean is responsible for Mundus’ strategy and commercial activities. He began his career in the oil industry Australia. After working internationally in commercial roles with BP in South Africa, the UK and Singapore he moved to Sweden with his family in 2009. He worked in business development and then as the Strategy and Growth Director for NASDAQ Commodities from 2009 to 2015. Sean holds an engineering degree from Adelaide University and an MBA from the Darden Business School at the University of Virginia.